United States: CMS Issues Final Regulations To Guide Medicare Providers And Suppliers In Complying With 60-Day Mandate To Report And Return Overpayments

Last Updated: March 1 2016
Article by Jared L. Facher and Brian T. McGovern

Most Read Contributor in United States, August 2018

The Patient Protection and Affordable Care Act ("PPACA"), signed into law on March 23, 2010, included a provision (the "Report and Refund Mandate"), broadly requiring health care providers, suppliers, Part D plans and managed care organizations that were overpaid by the Medicare or Medicaid program to report and return the overpayment within 60 days of the date when the overpayment was "identified."  See PPACA Section 6402(a).  Failure to comply with the Report and Refund Mandate exposes individuals and organizations to liability under the False Claims Act, Civil Monetary Penalties Law, and possible exclusion from participation in federal health care programs. 

On February 16, 2012, the Centers for Medicare and Medicaid Services ("CMS") had issued proposed regulations (the "Proposed Regulations") that outlined steps providers and suppliers were to take when they "identified" an "overpayment."  The regulations, however, were not finalized for the next four years, leaving providers and suppliers without definitive guidance on how to comply with the Report and Refund Mandate.  As we explained in our prior memorandum of August 6, 2015, courts had to fill this regulatory void in False Claims Act cases alleging a violation of the Report and Refund Mandate -- most notably in Kane v. Healthfirst, Inc., No. 11-cv-02325-ER (S.D.N.Y. Aug. 3, 2015). 

On February 12, 2016 -- almost four years to the day the Proposed Regulations were promulgated -- CMS finalized its regulations (the "Final Regulations"), departing in some important respects from its Proposed Regulations and the decision in Healthfirst, but ultimately giving providers and suppliers clearer direction for complying with the Report and Refund Mandate.  See 81 Federal Register 29 at 7654 – 7684.  As detailed below, the Federal Regulations provide that --

  • ·an overpayment has been "identified" to trigger the 60-day clock when a provider [A] has determined, or should have determined, through the exercise of "reasonable diligence," that it received an overpayment, and [B] has "quantified the amount of the overpayment;"
  • ·to report an overpayment, a provider can use a menu of options, including an "applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the applicable Medicare contractor;" and
  • ·the "look back" period for determining what claims need to be reviewed for determining the full scope of overpayments is now six years, not 10 years.

CMS Final Regulations

In our memorandum of March 5, 2012 we analyzed the Proposed Regulations; and in our August 6, 2015 memorandum, we discussed how the federal district court in Healthfirst interpreted key provisions of the Report and Refund Mandate.  In this memorandum, we discuss how those provisions are explicated in the Final Regulations, how the Final Regulations differ from the Proposed Regulations, and how they square with the court's decision in Healthfirst.

When is an Overpayment "Identified" for Purposes of Triggering the 60-Day Report and Refund Mandate?  The Proposed Regulations provided that an overpayment is "identified" when a provider has "actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment," which tracks how the term "knowing" is defined under the Federal False Claims Act.  CMS suggested that the 60-day clock commenced once the provider had identified the existence of an overpayment, if not the exact amount

For its part, the court in Healthfirst embraced the definition urged by the Government, that an overpayment has been "identified" when a provider has determined, or should have determined through "reasonable diligence," that it has received an overpayment.  Significantly, the Healthfirst court did not address whether, beyond determining that the provider has been overpaid, the provider had to also determine the amount of the overpayment to trigger the 60-day Report and Refund Mandate. 

The Final Regulations essentially adopt the "reasonable diligence" standard relied on in Healthfirst, but clarify that "reasonable diligence" needs to be undertaken only when a provider "obtains credible information concerning a potential overpayment."  Thus, a mere allegation or suspicion that a provider may have been overpaid, lacking "credible information", would not compel a provider to undertake an investigation.  Whether information is "credible" then requires an initial threshold judgment call on the part of the provider.

Moreover, the Final Regulations go one step further in clarifying when an "overpayment" has been "identified" -- when a provider [A] has determined, or should have determined, through the exercise of "reasonable diligence," that it received an overpayment, and [B] has "quantified the amount of the overpayment."  Therefore, the Final Regulations contemplate that the overpayment is "identified," and the 60-day Report and Refund Mandate begins to run, after both the amount and fact of an overpayment has been determined.  This clarification will give comfort to providers that they need not rush to make an initial self-disclosure after concluding that it had been overpaid, and can wait until it completes its "due diligence" investigation to determine the magnitude of the overpayment amount. 

On the other hand, a provider cannot avoid or delay the Report and Refund Mandate by not performing any investigation:  the 60-day time period to report and return an overpayment begins when "either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment."  If no investigation is performed, then the 60-day clock starts as soon as the provider has received "credible information" of an overpayment. 

How long does a provider have to perform a "due diligence" investigation?  Both the guidance in the Proposed Regulations and the court in Healthfirst advised that providers should act with "deliberate speed" -- a nebulous standard -- to identify whether an overpayment exists after they receive information of a potential overpayment.  In a sharp departure, the guidance in the Final Regulations instructs that providers have "six months" to undertake a "timely, good faith investigation of credible information," absent extraordinary circumstances.  In other words, once a provider receives "credible information" that it may have been overpaid, the provider has up to six months (absent extraordinary circumstances) to then verify that an overpayment was received and to quantify the amount.  Consequently, a provider potentially has a total of eight months to comply with the Report and Refund Mandate (six months for timely investigation and two months for reporting and returning). 

Notably, the six-month allowance to conduct and complete "due diligence" would not have changed the analysis in Healthfirst, where the government alleged that the provider had not adequately investigated or returned the apparent improper Medicaid claims in over two years since the whistleblower had shared a spreadsheet pointing to those claims. 

Note, however, that the 60-day clock to report and return the overpayment commences once the due diligence is complete and the overpayment has been verified and quantified -- which could be at any point within the six-month timeframe.  Thus, the 60-day Report and Refund Mandate is triggered at essentially the earlier of the date of completion of the investigation or the expiration of the six months, absent extraordinary circumstances.

What needs to be reported, and to whom?  Both the Proposed and Final Regulations include specific details as to what information needs to be reported to comply with the Report and Refund Mandate.  However, the Final Regulations provide greater flexibility about how and to whom the overpayment should be reported.  Unless a provider is making a disclosure under the OIG's Self-Disclosure Protocol (in the case of suspected fraud) or the CMS Voluntary Self-Referral Disclosure Protocol (in the case of a Stark Law violation), the provider can use an "applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the applicable Medicare contractor" to report an overpayment. 

How Far Back in Time Do Providers Have to Look for an Overpayment?  The Proposed Regulations called on a provider to investigate potential overpayments within 10 years of the date an overpayment was received -- the outside limitations period for a False Claims Act violation.  The Final Regulations reduce this time period to six years.  CMS explained that the shorter, six-year period addressed providers' concerns about the burden of investigating claims over a 10-year look back period. 

Does "Reasonable Diligence" Only Take "Six Hours"?  In the Proposed Regulations, CMS estimated that it would only take a provider approximately 2.5 hours or $92.75 of expense, utilizing accountants, auditors, and in-house administrative personnel, to comply with the Report and Refund Mandate.  In an apparent "concession," in the Final Regulations, CMS now estimates that the "per report" burden to providers to be 6 hours, at the expense of $322.22. 

While CMS estimates the investigation should take only six hours, CMS allows up to six months to conduct the investigation to determine the amount of overpayment.  Respectfully, these numbers do not add up.  It is hard to imagine how any provider, charged with reviewing claims over a six-year period to determine the scope and amount of overpayment, would only need six hours to conduct a proper investigation.  It is likewise highly questionable that telling the OIG, or DOJ, that you spent a total of six hours -- albeit consistent with CMS' expectations -- to ascertain the full extent of potentially six-years' worth of overpaid claims, would convince the authorities that you have engaged in "reasonable diligence," so as to avoid potential liability under the False Claims Act. 

Key Takeaway:  Implement, and Document, Proactive & Reactive Compliance with the Report and Refund Mandate:  With the regulations now final, providers are afforded clearer instruction on how to comply with the Report and Refund Mandate.  Notably, in the guidance to the Final Regulations, CMS states that "reasonable diligence" includes both [1] "proactive compliance activities . . . to monitor for the receipt of overpayments" and [2] investigations in response to "credible information of a potential overpayment."  Accordingly, this guidance reaffirms that providers and suppliers must implement effective compliance programs to also detect and uncover overpayments that may be received. 

In either circumstance, CMS encourages providers to "maintain records that accurately document their reasonable diligence efforts to be able to demonstrate their compliance with the rule."  Failing to document one's steps may expose a provider to the charge that it has not undertaken the required compliance activities or "good faith" investigation, or, as alleged in Healthfirst, has done "nothing" to address possible overpayments in the face of credible information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions